Seller Concessions by Loan Type: 2026 Limits Compared

Seller concessions are capped at 4% on a VA loan, 6% on FHA and USDA, and somewhere between 3% and 9% on a conventional loan depending on how much you put down. Those four numbers get lined up in a table on nearly every mortgage site, and the table is misleading — because the programs don't measure the same thing, against the same value, or with the same items inside the cap.

The 2026 limits at a glance

* USDA's commission carve-out is the one genuinely unsettled item on this table — see the USDA section below.

Every program exempts something from its cap. What differs is how much, and VA is the only one whose exemption is the buyer's closing costs as a category rather than a short list of seller-side and lender-side items. The conventional row is abridged: Fannie's 3% tier rises to 6% for a principal residence, but only on Fannie Mae-owned REO, under B5-4.2-03, Loans Secured by HomePath Properties.

The 4% rule, and why VA doesn't call it an IPC

"The 4% rule" is shorthand for one line of VA guidance: "We don't limit credits for a loan's closing costs, but we do limit seller's concessions to no more than 4% of your home's reasonable value." That's the whole rule. Everything else written about it is an attempt to say which dollars land on which side of that sentence.

The vocabulary is part of why it confuses people. Fannie Mae and FHA both regulate this subject under the heading "interested party contributions," or IPCs, a single bucket covering anything of value the seller, builder, agent or lender adds to the deal. VA doesn't use that term. It splits the same money into two streams and regulates only one of them:

• Closing-cost credits — title insurance, the title exam, the MERS fee, the appraisal, the origination fee, normal discount points. VA does not cap these.
• Seller's concessions — the 4% bucket, which VA defines as "anything of value added to the transaction by the builder or seller for which the buyer pays nothing additional and which the seller is not customarily expected or required to pay or provide."

That definition, and the list under it, come from the document your lender actually works from: VA Pamphlet 26-7, the Lender's Handbook, at Chapter 8, Section 5. VA links the handbook from its Lender Resources page, and it is effectively invisible to search engines — part of why this rule is so badly reported. The archived official Chapter 8 says seller concessions "include, but are not limited to":

• payment of the buyer's VA funding fee
• prepayment of the buyer's property taxes and insurance
• gifts such as a television set or microwave oven
• payment of extra points to provide permanent interest rate buydowns
• provision of escrowed funds to provide temporary interest rate buydowns
• payoff of credit balances or judgments on behalf of the buyer

And then the sentence the whole comparison turns on: "Seller concessions do not include payment of the buyer's closing costs, or payment of points as appropriate to the market." The handbook even works the example — if the market rate is 7½% with two discount points, a seller paying those two points has made no concession at all; if the seller pays five points, three of them are a concession.

Three cautions on that list. First, it is expressly not exhaustive, so an item nobody anticipated can still land inside the 4%. Second, VA's Credit Standards course presents a slightly different six-item version, introduced with "consists of only these items" — a closed-list framing the handbook doesn't use, and one that folds permanent buydowns into a broader "points above what is appropriate to the market" item. Our reading is that the handbook is the better guide where the two diverge, since it is the policy manual lenders are held to and the course is training material.

Third, and this one is about the citation itself, because it matters on a rule this load-bearing. The copy quoted above is the archived Change 15 text, dated November 8, 2010 — the last publicly fetchable version. The live handbook moved to VA's KnowVA portal, which serves an empty application shell to any automated reader, so we cannot diff the 2010 wording against what is on VA's servers today. Two things say the topic survived the move: Circular 26-24-14 cites "VA Lenders Handbook M26-7, Chapter 8, Topic 5" by name, and VA's own funding-fee page still defines concessions the same way — though that page's short example list (funding fee, debt payoff, prepaid hazard insurance) is looser than the handbook's six items and omits buydowns and gifts. Treat the six-item list as well-supported but not freshly verifiable, and have your lender confirm any borderline item against its current copy.

So "4% seller concessions" and "4% interested party contributions" are not the same claim. Treating them as interchangeable is what produces the advice you'll see elsewhere, that a VA seller can contribute less than an FHA seller. Read the 4% as an IPC cap and everything would count toward it, which would make VA the stingiest program on the board. Read it the way the handbook writes it and the buyer's closing costs plus market-rate points sit outside the cap entirely.

Why the biggest percentage isn't the best deal

Take a $400,000 purchase and a buyer putting little or nothing down.

On the bars, FHA and USDA look twice as good as conventional and half again as good as VA. Then you read what each cap has to swallow.

FHA's limit is spelled out in HUD Handbook 4000.1: interested parties "may contribute up to 6 percent of the sales price toward the Borrower's origination fees, other closing costs, prepaid items, and Discount Points," and that 6% also has to cover permanent and temporary interest-rate buydowns and other payment supplements, payments of mortgage interest on fixed-rate loans, mortgage-payment protection insurance, and the upfront mortgage insurance premium. On a $400,000 FHA purchase, that $24,000 ceiling is doing a lot of work before any of it becomes a favor to you.

The VA is structured the other way around, as the 4% rule above lays out. Its closing-cost channel — title insurance, the title exam, the appraisal, the origination fee, normal discount points — is uncapped, and the 4% is reserved for the concession items the handbook lists. Nothing has to be traded off against anything else.

Stack VA's uncapped closing-cost channel on top of its 4% and the total a motivated seller may contribute under program guidelines comes out ahead of what FHA's larger-looking 6% permits. Same seller, same house, more help.

There's a second reason, and it's the one almost nobody writes down.

The caps are ceilings, not budgets

On FHA and conventional loans, seller help is capped twice: once by the percentage, and again by what you actually owe. Fannie Mae states that "financing concessions must be equal to or less than the sum of the borrower's closing costs. Any amount exceeding the borrower's closing costs must be treated as a sales concession." FHA says the same thing from the other direction: contributions "that exceed actual origination fees, other closing costs, prepaid items, and Discount Points are considered an inducement to purchase."

So the 6% and the 9% aren't spending money. If your actual closing costs come to $9,000, a 9% conventional allowance of $36,000 is worth $9,000, and the rest would be deducted from the sales price your loan is sized against. The percentage only binds when it lands below your real costs.

VA's 4% works differently, and this is the part worth understanding. Two of the items it attaches to aren't cost reimbursement at all: paying off a credit balance or judgment of yours at closing, and outright gifts. USDA rules out most of that ground: seller contributions "cannot be used to pay an applicant's personal debt or as an inducement to purchase by including movable articles of personal property such as furniture, cars, boats, electronic equipment, etc." On FHA or a conventional loan, a credit beyond your actual costs is an inducement or a sales concession by definition.

That's the real asymmetry. Other programs mostly let a seller reimburse what you owe. VA lets a seller pay what you owe and, within the 4%, hand you value on top of it.

Conventional: the cap that rewards a bigger down payment

Fannie Mae's Selling Guide B3-4.1-02 sets financing-concession limits on a sliding scale:

¹ Fannie Mae carries this footnote on the 3% row itself: for a principal residence, the limit rises to 6% on Fannie Mae-owned HomePath properties (B5-4.2-03). A second home stays at 3%.

The scale runs opposite to what most buyers expect. The person who needs seller help most, the one putting 3-5% down, is allowed the least of it. The logic is risk rather than fairness: a large credit inflates the effective price, and the more equity already in the deal, the less that distortion matters to whoever buys the loan.

Two details catch people out. The percentage is "calculated using the lower of the sales price or appraised value (not the loan amount)," so a low appraisal cuts the allowance on a conventional loan too. And investment purchases are held to 2% regardless of down payment, which is worth knowing before you assume a rental deal works the way your last primary-residence purchase did.

What concessions can never do

The two programs that require money from the buyer both say the same thing: seller money can't be the money that proves you have a stake.

Fannie Mae states that IPCs may not be used to "make the borrower's down payment," to "meet financial reserve requirements," or to "meet minimum borrower contribution requirements." FHA points the same way — interested-party contributions "may not be used for the Borrower's MRI," the Minimum Required Investment of "at least 3.5 percent of the Adjusted Value of the Property."

This lands hardest on a conventional buyer counting on the seller to cover reserves, which isn't allowed. It's mostly moot for VA and USDA buyers, since neither program requires a down payment to begin with. USDA draws its restriction somewhere else entirely: seller contributions "cannot be used to pay an applicant's personal debt or as an inducement to purchase" through movable personal property like furniture or cars — though the handbook exempts "household appliances that are typically part of the purchase transaction."

USDA: six percent, two settled carve-outs, and one in flux

USDA's guaranteed loan program keeps it short. Chapter 6 of HB-1-3555 states that "Seller contributions (or other interested parties) are limited to six percent of the sales price and must represent an eligible loan purpose in accordance with this paragraph."

Two carve-outs sit in the same paragraph and have been there across handbook revisions. Closing costs or prepaid items the lender pays through premium pricing don't count against the 6%, and neither do funds the seller provides for repairs — though repair money has to be held in an escrow account.

The third one, real estate commission fees, is genuinely unsettled — and not in the way other guides describe, because most of them don't notice the conflict at all. USDA's current handbook revision, footer Revised (05-05-25) PN 640, adds commission fees to the carve-out sentence: funds the seller provides "for repairs or to pay the buyer's real estate commission fees are not included in the interested party contribution limitation." The previous revision, PN 580, said nothing about commissions.

The regulation behind the handbook doesn't name them either. 7 CFR 3555.102(h) bars "purchasing a home if the seller, or other interested third party, contributes more than 6 percent, unless otherwise provided by the Agency, of the property's sales price toward the purchaser's mortgage financing costs, closing costs, escrow accounts, furniture or other giveaways." That "unless otherwise provided by the Agency" clause is the hook a handbook carve-out would hang on — USDA can vary the rule administratively without amending the regulation, which is why the handbook can say what it says.

Then, eleven months after publishing that handbook revision, USDA's own rulemaking described current policy as the opposite of it. In a proposed rule published April 20, 2026, the Rural Housing Service wrote that "currently, under 7 CFR part 3555, if the seller agrees to pay fees on behalf of the buyer, including real estate commission fees, the amount of those fees is included in the maximum interested party contribution limitation of 6 percent," and proposed to exclude them going forward (91 FR 20941). Comments closed June 22, 2026, and there is no final rule.

So the agency's handbook says commission credits sit outside the 6%, and the agency's own 2026 preamble says they sit inside it. We can't tell you which reading your lender's underwriter will apply, and neither can any other page on this subject — so treat a USDA commission credit as counting against the 6% until your lender confirms in writing that it doesn't. That is the conservative assumption, and it's the one that doesn't blow up your file at underwriting.

VA settled the same question for itself two years ago, and said so in one sentence. Circular 26-24-14 — issued June 11, 2024, effective August 10, 2024, and still valid until rescinded — states: "As a reminder, VA does not treat the seller's payment of buyer-broker charges as a seller concession." The same circular opened a temporary local variance letting veterans pay reasonable and customary buyer-broker charges themselves, in markets where that compensation no longer flows through the listing broker.

One detail to carry with that citation: VA amended this circular through Change 1, dated August 5, 2024. Change 1 replaces a single sub-paragraph, 3.d.(1), governing how a Veteran-paid buyer-broker charge is recorded on the Closing Disclosure: the original confined it to "lines 1 through 3 of section H," and the amendment drops that restriction, leaving just section H ("Other"). It does not touch the concession rule. So the operative authority is 26-24-14 as amended by Change 1, but the sentence quoted above reads the same either way. On the commission question VA is already where USDA is only now proposing to go.

Which loan type actually gets you the most help?

Ranked by what a typical buyer can realistically capture, rather than by the headline percentage:

1. VA. Uncapped closing-cost credits plus a 4% allowance that can go to debt payoff and outright gifts — value beyond your costs, which FHA and Fannie would treat as an inducement or a sales concession. (The funding fee isn't the contrast here: FHA expressly allows its own UFMIP inside the 6%.)
2. USDA's 6%. The handbook states no explicit dollar-level actual-cost test — the constraints are that a contribution "must represent an eligible loan purpose" plus the ban on paying personal debt or inducing with personal property. What earns USDA this slot is a different carve-out: seller-funded repairs sit outside the 6% entirely (held in escrow), where FHA treats a repair allowance as an inducement to purchase.
3. FHA's 6% and conventional's 6-9% are effectively tied. Both bind at your actual closing costs, so once your costs sit below the cap the tier stops mattering.
4. Conventional at 3% (above 90% LTV) is where a cap genuinely constrains a real buyer: 3% of a $400,000 purchase is $12,000, and closing costs plus prepaids can exceed that.

One qualifier on the VA ranking: Fannie Mae excludes a gift of equity from the IPC limits where the seller is also an acceptable donor, provided the donor isn't a builder or other interested party and has no affiliation with one, and the gift meets the Selling Guide's gift-of-equity requirements. So a related-party conventional sale can move value outside the concession cap too.

If you're eligible for a VA loan, the concession comparison is one more line in an already lopsided ledger — see how it stacks up against FHA, conventional and USDA financing. And if you're the one buying with the benefit, the VA-buyer guide to VA max seller concessions and the 4% limit goes item by item through what VA counts inside the 4% and which closing costs never touch it. If you're the seller, the guide to VA loan seller disadvantages covers the fees a VA buyer can't pay and what that leaves on your side of the table.

Find out what a seller could cover on your purchase

A specialist at a VA-approved lender can size the closing-cost credit and the 4% concession package on a real property. Free, about two minutes.

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Bottom line

The seller-concession table everyone publishes compares four numbers that aren't measuring the same thing. FHA and USDA allow 6% of the sales price but make it absorb your closing costs. Fannie Mae allows 3% to 9% of the lower of price or appraised value, scaled so the buyers with the least cash get the least help. VA allows 4% of reasonable value, then declines to cap closing-cost credits at all, which makes it the most generous of the four. If you have VA eligibility, start with a 2-minute eligibility check and find out what a seller can actually cover on the home you're looking at.